Symantec (SYMC) fell more than 12% in Friday trading after the company lost its March revenue and billing estimates, issued a weak June quarter and fiscal 2020 (ending in March 2020) guidance and announced that CEO Greg Clark has resigned. Rick Hill, board member and former CEO of chip maker Novellus Systems, will serve as interim CEO while Symantec looks for Hills' permanent replacement.
It's hard to give a positive spin on the numbers that Symantec only shared. Non-GAAP revenue fell 2% annually in the March quarter, with the company listing on the earnings call that software license and hardware sales were soft. Corporate Security Invoices fell 24% to $ 71
And at the centers of Symantec's guidance areas, the company forecasts that revenues will increase by only 2% in the June quarter and 1% in fiscal 2020.
By comparison, the research company IDC in March – after a strong start to the year For many security technology players, global IT security spending will rise by 9.4% this year to $ 103.1 billion. IDC also predicts security IT spending will grow at an annual rate of 9.2% from 2018 to 2022.
As I mentioned a year ago after Symantec had tumbled after a disappointing March report and news of an audit committee probe (it was finished in September) sees the company's top-line issues appear to run quite deeply. The company obviously loses part across many businesses, as it is about a long list of hungry rivals, many of which are focused on a more limited set of products and services, and show better sales performance. This list of rivals runs the spectrum from well-funded startups, and publicly-traded security games such as Zscaler (ZS), Palo Alto Networks (PANW) and Proofpoint (PFPT), to the security giants of IT giants such as Cisco Systems (CSCO) and IBM (IBM).
At first glance, Symantec's multiples look reasonable compared to many peers: The company's business value (market value and net debt) equals 14 times the expected fiscal 2020 cash flow (FCF) solution and less than 12 times the expected 2021 fiscal FCF.
But there are clearly good reasons why Symantec gets such a valuation discount, and with the company having done so little to remove top line concerns and now in the midst of a CEO search, it would not be surprising to see his estimates was taken further down.
As a result, Symantec can show great signs of stopping the latest stock distributions, it looks like a valuable one.
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